House Democrats find drug companies ‘unjustified’ in price hikes

Drug companies are deliberately targeting the U.S. to raise prices and game the patent system to delay generic competition in a way that is “unsustainable, unjustified, and unfair to patients and taxpayers,” according to the findings from a new investigation released Friday by House Democrats.

The investigation focused on 10 companies that sell 12 of the most expensive drugs to Medicare, including insulin, and found those companies collectively raised prices more than 250 times. The drugs in the committee’s investigation are now priced at a median of almost 500 percent higher than when they were brought to market, the report found.

All 10 companies have compensation structures that tie incentive payments to revenue and other financial targets, and several companies directly tied incentive compensation to drug-specific revenue targets, the report found.

The 269-page report from the staff of the House Oversight and Reform Committee is the culmination of a three year investigation started by the late Rep. Elijah Cummings (D-Md.), who was the committee’s chairman until his death in 2019.

Staff said they reviewed more than 1.5 million pages of documents — including internal strategy documents, communications among top executives, board materials and nonpublic pricing data.

It also builds off a series of hearings with executives from many of the companies examined in the report.

The report seeks to push back on the claims by the drug industry that price increases are necessary in order to fund research and development into new cures and serves as a call for the Senate to pass the Build Back Better legislation that would allow Medicare to negotiate the prices of some drugs.

The House passed its version of the bill last month, and Senate Democratic leaders are aiming to pass the legislation before Christmas. But Sen. Joe Manchin (D-W.Va.) is still not on board with the timeline, and Democrats need his support.

The documents showed some of the companies deliberately targeted the U.S. market for increases — while maintaining or lowering prices in the rest of the world — in part because Medicare cannot negotiate directly for lower prices.   

“The investigation has provided a rare glimpse into the decision-making of many of the world’s most profitable drug companies,” Oversight and Reform Committee Chairwoman Carolyn Maloney (D-N.Y.) said in a preamble letter to committee members. “Reforms are also needed to make pharmaceutical R&D spending more transparent and prevent anti-competitive practices that suppress generic competition and keep prices high.”

The drug industry often argues that critics focus too much on the list price for drugs, which is misleading because many patients get discounts.

But the report says the 12 drugs’ net prices that consumers pay out of pocket are “significantly higher” than when the medicines were introduced.

Debra DeShong, executive vice president for public affairs at the industry trade group PhRMA, called the report “misleading” and said it “fails to address abusive practices by insurance companies and middlemen who profit off a broken system while patients can’t afford their medicines.”

“This so-called investigation has ignored the real affordability problems people face, like rising deductibles and other out-of-pocket costs. This is nothing more than a partisan exercise to justify an extreme proposal that will restrict patient access to lifesaving cures and treatments. We think there’s a better way that would lower costs at the pharmacy, while preserving choice, access and innovation,” DeShong said.

The final report builds on some of the committee’s earlier work and also presents new findings from an investigation of insulin products manufactured by Eli Lilly, Novo Nordisk and Sanofi. These three companies collectively control approximately 90 percent of the global insulin market. 

“Over the past 20 years, they have repeatedly and dramatically raised the list prices of their rapid-acting and long-acting insulins and reaped billions of dollars in revenues,” the report found, adding that Medicare lost out on more than $16 billion in savings because of those increases.

The House bill would put a cap on how much seniors on Medicare pay for insulin, limiting it to $35 a month. 

At the same time, House Republicans on the committee released their own report, claiming pharmacy benefit managers (PBMs) are responsible for price increases, not drug companies. PBMs administer prescription drug plans for large employers and are tasked with negotiating discounts on drugs with pharmaceutical firms and insurers. 

PBMs have engaged in finger-pointing with drug companies and lawmakers over rising prices for years.

“Pharmacy Benefit Managers must be held accountable for their role in rising prescription drug prices, and Congress must take on PBMs to implement transparency and restore competition,” committee ranking member James Comer (R-Ky.) said in a statement.